Consumer rights Reforming statutory implied conditions and warranties

Consumer detriment

CCAAC is also mindful that it is likely that there are situations where consumers are being misled about their rights (whether intentionally or inadvertently). The TPA prohibits businesses from engaging in misleading or deceptive conduct (section 52) or making false or misleading representations (section 53). Therefore, it is against the law for a seller to do anything (either in advertising or conversation) that leads consumers to believe their statutory rights are limited, or do not apply, when this is not the case; for example, claims by a seller that no refunds will be given under any circumstances.

The following are some areas where it might be possible for consumers to be misled as to their rights:

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  Store return policies and ‘no refund’ signs — businesses may choose to display signs so consumers are aware of the store’s refund and returns policies before buying, but these must not mislead consumers. Some examples that could be misleading include:
  
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    signs that state ‘no refunds’ or ‘no refund on sale items’, which could lead consumers to believe they have no right to claim a refund under any circumstances, which is not true because if a statutory condition has been breached, the consumer may be entitled to a refund;
    
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    policies that set a time limit, such as ‘no refunds after 30 days’, which can be misleading because statutory rights have no time limits, other than what is ‘reasonable’; and
    
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    policies which insist that consumers return goods unopened, or in their original packaging, which may be misleading as these are not required to claim a remedy under statutory implied terms.
    
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  ‘Store credit’ — a consumer is generally entitled to receive any refund in the form of their original payment. It is misleading for a seller to insist that a refund be issued as store credit.
  
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  Passing on responsibility for a remedy to a manufacturer — because each sale is a contract between the buyer and the seller, consumers are entitled to insist that the seller provide them with a remedy, even if a problem is due to a manufacturer’s fault.
  
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  ‘No responsibility’ policies in regard to services — service providers must not imply, for example, that consumers have no rights if services are not carried out with due care and skill.
  

Unlike a failure to comply with the terms implied by Part V, Division 2 of the TPA, engaging in misleading or deceptive conduct and making false or misleading representations are breaches of the TPA, under Part V, Division 1. The ACCC can take court action against businesses that mislead or deceive consumers about their rights.

However, some submissions, such as CALC’s, argue that there is a ‘lack of regulator will, to use available enforcement mechanisms to tackle repeated misconduct by traders’.⁹³

CCAAC, therefore, believes that increasing the knowledge and awareness of consumers, traders and manufacturers — in addition to clearer enforcement mechanisms discussed in the next chapter — is fundamental to reducing consumer detriment. Information needs to be clear and readily available to all consumers to support and complement any proposed changes to the provisions of the new ACL.

Alternative options for addressing the problem

Clarifying the law

As discussed in the previous chapter, clarification of the law should go some way towards improving awareness of the rights, responsibilities and redress mechanisms available under it. Further, a move from the implied terms model to one of statutory consumer guarantees should be simpler to interpret and understand.

Given that CCAAC is recommending a significant simplification of the entire regime, it is anticipated that this will provide greater access to and understanding of the law.

Information provision

It is common in NZ for traders to display a sign at the point of sale that alerts customers to their rights under consumer guarantee legislation. CCAAC considers that similar signage in Australian stores would enhance the knowledge of Australian consumers in relation to consumer rights. One way of encouraging the use of signs regarding consumer rights would be for Australia’s consumer agencies to publish and distribute a common notice for display at the point of sale. Retailers would be strongly encouraged to display the notice, which would be available from all consumer agencies. If there is evidence, after the regime has been in effect for a period of time, of a lack of voluntary compliance, then the display of the notice could be mandated. The relevant Minister might be given power to prescribe the form. The Minister would seek to exercise this power only in the event that an approach based on voluntary compliance is not effective.

Clearly, a solution will involve more than just providing additional information. This is supported by CALC:

In our view, it is time to consider policy responses other than merely increasing information and education to consumers and traders, given the significant and systematic nature of the problem.⁹⁴

There is no doubt information is important. However, consideration should be given to some fundamental elements of information provision. Information needs to be simpler, clearer and targeted to recognise and value the diverse needs of consumers; provided at the right point in the consumer’s decision making process; available in a range of formats; and shared between consumers, retailers and manufacturers.

The Australian Industry Group suggested that the effectiveness of consumer information could be increased significantly by providing specific examples relating to product categories. These examples would benefit from suppliers and government agencies working in partnership to ensure that examples are relevant and realistic.⁹⁵ CCAAC supports this view, especially in relation to developing a better understanding about what consumers can expect in terms of durability for each specific product category.

Dr Nottage argues that further clarification for consumers may be achieved through well publicised test cases:

In addition, consumer agencies and peak consumer organisations (like Choice) should be encouraged to bring and publicise ‘test cases’, especially to determine (unavoidably general and evolving) questions like the statutory warranty’s time period for various types of products (especially such large value, high complaint items).⁹⁶

Well publicised test cases would provide consumers with useful examples of the operation of implied terms or consumer guarantees, which could significantly build understanding of consumers’ statutory rights.

Further, as discussed in greater detail in Chapter 7, well publicised test cases brought by consumer agencies in respect of misleading claims about consumer rights will also do much to increase awareness of those rights.

Findings 6.1 Current understanding by consumers and businesses of Australia’s laws on implied conditions and warranties is limited, leading to confusion and uncertainty about the application of the law. It is critical that Australia’s consumer agencies, retailers, manufacturers/importers and consumers have a common understanding about the nature and effect of the new statutory consumer guarantees. 6.2 Australia’s consumer agencies, together with New Zealand, should work together to: develop and publicise a single, simple message about statutory consumer guarantees and retailer and manufacturer/importer obligations, to inform and educate consumers and businesses about statutory consumer guarantees; develop, publish and distribute a single, clear and unambiguous notice for display at the point of sale, which can be used by all retailers to tell consumers about their statutory consumer guarantees. This could be done in conjunction with retailer and consumer representative bodies; and develop and publish clear and consistent information and guidance for consumers about statutory consumer guarantees and options for dispute resolution. 6.3 Retailers and manufacturers/importers have an important role in ensuring that consumers are aware of their statutory consumer guarantees. Retailers and manufacturers/importers should ensure that any information that they publish or provide to consumers about statutory consumer guarantees is clear, accurate and unambiguous. 6.4 Retailers should be strongly encouraged to display the notice recommended in Finding 6.2 at the point of sale. This notice would be available from all consumer agencies. Voluntary take up of this initiative should be considered as part of the review of enforcement and administrative arrangements under the Intergovernmental Agreement for the Australian Consumer Law, or earlier if required. If there is evidence that retailers are not informing consumers of their statutory consumer guarantees, consideration should be given to the introduction of a legal requirement to display such a notice in a form prescribed by the Minister.